Ratio Analysis of Bata Shoe Company

Prepared By: Saif Mohammad Khan ID# 1010123030 Course: ACT 201 Section: 2

Application of Transmittal
Date: 4th August, 2010 To Mohammad Nurunnabi Sagor (Nnb) Lecturer Department of Business Studies Faculty School of Business Administration and Management Subject: Submission of project on Ratio Analysis of Bata shoe Company Dear Sir, Here I am submitting my report on Ratio analysis of Bata Shoe Company prescribed by you in your course ACT-201. For this Purpose, I have gone through internet, different books, articles, journals, interview of authorities of the respective organizations and class lecture sheets for the relevant information of the assigned topic. Please call me for any further information at your convenient time and place. Sincerely, Saif Mohammad Khan ID#1010123030 Section-2 Semester- Summer 2010 Faculty of Business Administration and Management

Acknowledgement

At first I desire to express my deepest sense of gratitude of almighty Allah. With profound regard I gratefully acknowledge our respected course teacher Mr. Mohammad Nurunnabi Sagor, Lecturer, Department of Business Studies, Faculty: School of Business Administration and Management for his generous help and day to day suggestion during preparation of the report. I Like to give thanks especially to our friends and many individuals, for their enthusiastic encouragements and helps during the preparation of this report us by sharing ideas regarding this subject and for their assistance in typing and proof reading this manuscript.

History:
Bata Bangladesh is affiliated to the Bata Shoe Organization, the world\'s largest footwear manufacturing and marketing organization. It started operation in Bangladesh in 1962, Incorporation in Bangladesh in 1972. Currently, Bata Bangladesh operates 2 manufacturing plant Tongi and Dhamrai, Bata Bangladesh is producing around 110,000 pairs of shoes daily with employee . It has a modern tannery with the latest technological facilities to process 5 million square feet of leather yearly. The Tannery is equipped with a high-tech effluent treatment plant ensuring a pollution free environment for both workers and locality where we operate. Bata Bangladesh sells all kinds of footwear which are classified in alignment with market sectors as follows:

1. Domestic market under the trademarks of Bata, Power, Weinbrenner

Bubblegummers, and Marie Claire, through a countywide distribution network comprising retail stores, DSPs and independent dealers.

2. Overseas market under the trademarks of its customers, and also markets its own
brands to sister companies and the Middle East.

Mission Statement:
Bata Shoe Company has the mission to protect our people, customers and communities and to protect our natural environment in order to help sustain human development. Bata companies have a tradition of being good corporate citizens and seek to contribute to the well-being of the countries and communities where they operate and also generating profit for the business. Bata strives to develop long-term partnership with its suppliers and business associates. Each Bata company around the world is committed to ensuring that operations are conducted ethically.

Objective:
Shoemaking is one of the world's oldest crafts--shoes have been works of art and the stuff of legends. Around the world, the Bata brand is reserved for well-made and well-priced casual footwear. They are devoted to designing, producing, and providing their customers with the best in commercial fashion footwear for the whole family. Bata Industrials, they are fully focused on the wear experience and perception of the men and women who wear their shoes. Everyday customers wish and need drives their efforts in research, development and design. Their main motto is further in protection, further in support, further in fit and durability. This means that Bata Industrials stands for Footwear beyond Safety. They present people with renewed program in which safety, health and comfort come together more attractively than every before. The performances of various devices are used in the Bata Shoe Company Ltd. For the analysis of Financial Statement data to bring out the comparative and relative significance of the financial information presented. This are include in the below: 1. Ratio analysis 2. Comparative analysis 3. Percentage (Common size) analysis

Bata Shoe Company (Bangladesh) Limited Ratio analysis as at the year ended on 31st Dec 2009 and 2008
Ratio
1. Current ratio

Formula
current asset/current liabilities

2009
2164836062 /1470517469 = 1.47:1 352067178+100987926/ 1470517469 = 0.30:1

2008
2013126,770/ 1384275205= 1.45:1 269407792+79493676/ 1384275205= 0.25:1

2. Acid-test ratio

Cash + Short-term investments +

Receivables(net)/current 3. Inventory turnover ratio 4.Profit Margin Ratio 5. Asset Turnover 6.Return on Asset 7.Debt to Total Asset 8.Receivable Turnover 9. Average Collection period 10. Days in Inventory 11. Return on common stock holders equity 12. Earning per share (EPS) 13. Price Earning Ratio 365/ Inventory Turnover Net Income - pref. dividend/ Avg. common stock holders equity Net Income/ Weighted share common stock outstanding Market Price per Share of Stock/ Earning per share 365/2.24 =162.94 days 449406445/(1120487323 + 972040878)/2 = 42.95 % 449406445/13680000 = 32.85 10/32.85 = 0.30 365/2.09 = 174.64 days 449415702/(1120487323 + 972040878)/2 = 42.95 % 449415702/13680000 = 32.85 10/ 32.85 = 0.30 Total Debt/Total Asset Net Credit Sales/Avg. Net Receivable 365/ Receivable Turnover Net Income/ Avg. Asset Net Revenue/ Avg. Asset liabilities Cost of goods sold/ Average inventory Net Income/Net Revenue 3237854140/(1433325407+ 1460138433)/2 = 2.24 times 449406445/4995356942 = 8.99 % 4995356942/ (2722964025+2483380658)/2 = 1.92 times 449406445/ (2722964025+2483380658)/2 = 17.26 % 1602476702 / 2722964025 = 58.85 % 4995356942/(100987926+ 79493676)/2 = 55.35 times 365/55.35 = 6.59 Days 3030618923//(1433325407+ 1460138433)/2= 2.09 times 449415702/4623312077 = 9.72 % 4623312077/ (2722964025+2483380658)/2 = 1.78 times 449415702/ (2722964025+2483380658)/2 = 17.26 % 1511339780/ 2483380658 = 60.86 % 4623312077/(100987926+ 79493676)/2 = 51.23 365/ 51.23 =7.12 Days

Horizontal comparing analysis of Balance Sheet

Bata Shoe Company Limited For the year 2009 and 2008
Base year: 2008

Particulars
Asset
PPE Capital work in Progress Investment in Subsidiary Deferred Tax assets Total non-current asset Inventories A/R Advances, deposits & prepayments Cash & cash equivalent Total Current Asset Total Asset

2009 (tk.)

2008 (tk.)

Increase/ Decrease

Percentage

508297292 13860671 19970000 16000000 558127963 1433325407 100987926 278455551 352067178 2164836062 2722964025

457967888 12286000 470253888 1460138433 79493676 210086869 263407792 2013126770 2483380658

50329404 3714000 87874075 (26813026) 21494250 68368682 88659386 151709292 239583367

10.99 % 30.22 % 18.69 % (1.84 %) 27.03 % 32.54 % 33.66 % 7.54 % 9.65 %

Equity
Share Capital Reserve & surplus Total equity 136800000 983687323 1120487323 136800000 835240878 972040878 0 148446445 148446445 0 17.77 % 15.27 %

Liabilities

Deferred Liability Total non-current liabilities Creditors for goods Creditors for expenses Creditors for other finance Provision for tax Unclaimed dividend Total current liabilities Total liabilities Total equity & liabilities

131959233 131959233 278984626 518429047 173433804 454922477 44747515 1470517469 1602476702 2722964025

127064575 127064575 387613341 353562172 129715417 432674318 80709957 1384275205 1511339780 2483380658

4894658 4894658 (108628715) 164866875 43718387 22248159 (35962442) 86242264 91136922 239583367

3.85 % 3.85 % (28.03 %) 46.63 % 33.70 % 5.14 % (44.56 %) 6.23 % 6.03 % 9.65 %

Vertical comparing analysis of income statement Bata Shoe Company Limited For the year 2009 and 2008
Particulars
Revenue Cost of goods sold Gross profit Other income Administrative selling & Distribution expenses Profit from op. expense Profit before contribution to workers profit fund Contribution to workers profit participation fund Profit before tax 629692445 12.61 % 619634702 13.40 % (33141708) 0.66 % (32612353) 0.70 % 656085109 662734153 13.13 % 13.26 % 648273621 652248055 14.02 % 14.10 % Amount 4995356942 (3237854140) 1757502802 7103518 1108521211

2009
Percent 100 % 64.82 % 35.18 % 0.14 % 22.19 % Amount 4623312077 (3030618923) 1592693154 7241407 951660940

2008
Percent 100 % 65.55 % 34.45 % 0.16 % 20.58 %

Profit after tax (Net income)

449406445

8.99 %

449415702

9.72 %

Recommendation
So form the above discussion and analysis I can recommend about Bata Shoe Company is that: They should focus on profit generating activities, as the analysis shows that there has been a fall on profit margin ratio from 2008 to 2009Company should also contribute performance in revenue as it has not been able to generate that much of net income compared to 2008. The companys average collection period is decreasing which is a favorable sign. Bata will continue to pursue strict cost controls, improve the product mix, consolidate the manufacturing activities, and transform the wholesale business. This along with the companys plan to expand its retail presence and enhance its brand appeal will drive revenue and profitability growth in the next few years. If they develop their selling strategy a bit more, I expect revenue to grow and increase the profit margin ratio.

Conclusion:
From the overall prospective Bata Shoe Company limited (Bangladesh) running a successful business by providing quality products and satisfactory services. As a result, it has been able to generate profit by protecting the right of the consumer. The above ratio analysis and comparative study has made it possible to know about the total financial position of the company and accordingly recommended on it.

Interview story:
At the appointed day, that is 4/08/10 I had the chance to meet the Employee Relation Manger Mr. Rana Kaiser Ahmed (Cell: 01713333187, Tel : 9800501-5,Ext.290) of Bata shoe company at Tongi Branch. I had to wait for sometimes because of the training session of the employees were happening. But half an hour later I was called in the room. Mr. Rana Kaiser Ahmed was very helpful in contributing to our project. He told us the actual

financial position and key facts that assisted a lot in making the ratio analysis and comparative study. He also told us about the brief history of the company and also the numbers of employee involved in it. After recording all the necessary information, I went back home to finish my project.

Reference:
1. Annual Report 2009 Bata Shoe Company 2. Kieso, Kimmel, Weygandt Accounting Principles page( 788-797) 3. www.batabd.com